Hoey UT published

Taxpayer lost

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By gordo
19th May 2021 15:36

UTT Tribunal comments were persuasive but not binding so the appeal at UTT failed.

The Tribunal ruled that the amount assessable under ToAA was Nil. The Tribunal also ruled that HMRC did have a discretion to apply PAYE as they saw fit, which would appear to mean that the Loan Charge was never needed, but that they could not apply that discretion retrospectively. However, since the issue in the case of Mr Hoey was one of collection it was, rather strangely, a matter for the County Courts to decide.

It looks like the matter will be appealed further. https://gofund.me/b01f74f3

"Fundamentally, it is vital to ALL legal challenges of DR schemes (and the Loan Charge) that HMRC are not permitted to retrospectively exercise a discretion that would allow them to dispense with any need to assess employers, agencies or end users, indeed anyone at all; to dispense with all time limits and taxpayer safeguards and which would allow HMRC to pursue individuals “without temporal limitation”......We are able to confirm that the appeal will proceed"

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Replying to gordo:
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By Justin Bryant
19th May 2021 16:34

That's very interesting and good luck to him and Rory Mullan QC in CoA. As for the UT's decision:

Para 95 - the jurisdiction point is borderline as the UT says they think HMRC’s s59B further sequential step analysis is the ‘better view’. Had the UTT instead
held that the PAYE credit was included in the tax payable amounts in s8 and s9 of TMA the tribunal would have had jurisdiction as these relate to assessment not collection. But it concluded it was only to be included at the payment stage (per the figure in s58B) which it said fell within the collection stage although this was borderline.

The key substantive point though is that the UT say the PAYE credit is given to the taxpayer even if the employer has not deducted the tax. But he nets it off his tax to pay at the later stage of when tax is collected not at the assessment stage. HMRC are not able to use S684(7A) ITEPA to retrospectively alter the taxpayer’s position by removing the deduction obligation of the payer (this can’t operate retrospectively against the taxpayer who still gets a credit for the deduction when the obligation to deduct arose) - para 119.

The employee then says he gets the credit under s58B and then it’s up to HMRC to argue otherwise in the CC (para 101). This assumes HMRC do not successfully
transfer the PAYE liability to the employee under Reg 72, 81 etc of the PAYE Regs. The point is they cannot do this retrospectively under s6847A after the obligation
on the employee to deduct has arisen (the credit crystallises at that point). And it seems can only be taken away by one of specific transfer of lability Regs.

This may mean in those cases where we had companies which had gone into liquidation with outstanding PAYE obligations - HMRC may well struggle to
transfer the liability over to the employee. Plus schemes where the employer gets liquidated - HMRC’s options against employee seem limited. I don’t think they amended Part 7A in the end on this transfer of PAYE liability issue because they thought that s684(7A) / TMA s8 and 9 combined provided sufficient protection. But may well not especially if the employer is liquidated before a 72/81 transfer
attempt.

Also, it is helpful re ToAA and MD – as the latter is consistent with EU tax abuse concept, which is quite narrow.

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